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To: Jong Hyun Yoo who wrote (5243)	2/18/2005 5:37:30 PM
From: etchmeister	Read Replies (1) \| Respond to of 5867

PVD business has a terrific gross margin. interesting; rightful or not but NVLS was "complaining" a couple weeks ago about AMAT's predatory pricing with regards to PVD

To: Jong Hyun Yoo who wrote (5243)	2/18/2005 8:58:34 PM
From: Cary Salsberg	Read Replies (1) \| Respond to of 5867

Hi, Thanks for your analysis. One correction, gross margin was 44%, not 41%. Also, to amplify the PVD situation, CEO Hill said that AMAT PVD tools that had sold for $7M, were being sold for $4M. You did not include shipment levels compared to manufacturing capacity as a factor which contributes to gross margin. As has been mentioned, shipments are lumpy and different customers result in differences between the two in shipment levels. The general consensus is that customer mix favored LRCX in the last quarter, but that AMAT will be favored next. LRCX has forecasted an 18% drop while AMAT flat to down 10%. So, gross margins need to be averaged over a few quarters. I think your analysis is a good model to start with, but I need to verify some of your numbers before I would accept "very poor" margins instead of below average margins.